Astera Labs outlines AI Infrastructure 2.0 strategy and projects $203M–$210M Q3 revenue led by Scorpio and rack-scale connectivity
Aug. 06, 2025 1:01 AM ET
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Earnings Call Insights: Astera Labs (ALAB) Q2 2025
Management View- Jitendra Mohan, CEO, reported, "Astera Labs delivered strong results in Q2, with all financial metrics coming in favorable to our guidance. Quarterly revenue of $191.9 million was up 20% from the prior quarter and up 150% versus Q2 of last year." Growth was driven by signal conditioning and switch fabric product lines, with the Scorpio P-Series switches supporting PCIe 6 ramping into volume production and exceeding 10% of total revenue. Mohan highlighted that Scorpio is on track to become the company's largest product line over the next several years.
- The company announced expanded partnerships, including a broadened collaboration with NVIDIA to support NVLink Fusion, a new partnership with Alchip Technologies, and participation with AMD to showcase UALink for open memory semantic-based scale-up fabrics. Mohan stated, "We are in the early stages of the AI Infrastructure 2.0 transformation which Astera Labs is uniquely positioned to help proliferate over the coming years. Scale-up connectivity for rack-scale AI infrastructure alone will add close to $5 billion of market opportunity for us by 2030."
- Sanjay Gajendra, President and COO, explained the company's strategy to increase addressable dollar content per AI accelerator, with three product lines now contributing about 10% each of total sales. He expects Scorpio X-Series to begin shipping for customized scale-up architectures in late 2025, driving another revenue baseline step-up.
- CFO Michael T. Tate stated, "For Q2 of 2025, Astera Labs delivered quarterly revenue of $191.9 million, which was up 20% versus the previous quarter and 150% higher than the revenue in Q2 of 2024." He added, "Q2 non-GAAP gross margin was 76% and was up 110 basis points from March quarter levels... Non-GAAP operating margin for Q2 was 39.2%, up 550 basis points from the previous quarter." Non-GAAP diluted earnings per share was $0.44, with cash flow from operations at $135.4 million and $1.07 billion in cash and equivalents.
Outlook- For Q3 2025, Tate guided, "We expect Q3 revenues to increase to within a range of $203 million and $210 million up roughly 6% to 9% from the second quarter levels. For Q3, we expect Aries, Taurus and Scorpio to drive growth in the quarter."
- Non-GAAP gross margins are expected to be approximately 75%. Non-GAAP operating expenses are forecasted in the range of $76 million to $80 million. Non-GAAP fully diluted EPS is expected in the range of $0.38 to $0.39. The non-GAAP tax rate is expected to be approximately 20% for Q3 due to a recent tax law change, normalizing to approximately 15% for the full year.
Financial Results- Astera Labs reported Q2 2025 revenue of $191.9 million, up 20% sequentially and 150% year-over-year. Non-GAAP gross margin was 76%, with operating margin at 39.2%. Non-GAAP diluted earnings per share was $0.44. Cash flow from operations reached $135.4 million. The company ended the quarter with $1.07 billion in cash, cash equivalents, and marketable securities.
- Q2 non-GAAP operating expenses were $70.7 million, with R&D expenses of $48.9 million, sales and marketing at $9.4 million, and G&A at $12.4 million. Interest income for the quarter was $10.9 million.
Q&A- Harlan L. Sur, JPMorgan: Asked about Scorpio X-Series differentiators and COSMOS software's role. Mohan responded, "The success that we have enjoyed so far is rooted on primarily... our closeness to our customers... our execution track record... and that's where the COSMOS software suite comes in." COSMOS enables customization and diagnostics, helping position Scorpio as an anchor socket.
- Sur followed up on UALink adoption and timeline. Gajendra replied, "We see tremendous amount of interest with UALink... we are counting 10-plus right now that are looking at leveraging some of these open standards... transitioning perhaps to a broader UALink deployment in 2027 and later."
- Ross Seymore, Deutsche Bank: Inquired about customer profile diversity and Scorpio's anchor role. Gajendra explained Scorpio P-Series is broadly adopted for scale-out, while X-Series is an anchor for scale-up, pulling in other Astera products via COSMOS and hardware integration.
- Seymore asked about gross margin trajectory and tax rates. Tate clarified, "The 20% is specifically to Q3... for Q4, you should expect it to normalize around 15%." He maintained the long-term gross margin target of 70%, noting near-term benefits from higher revenue over fixed costs.
- Blayne Curtis, Jefferies: Questioned Scorpio's revenue contribution and growth expectations. Tate detailed, "Scorpio P launched into volume production, a little ahead of what we anticipated... For the X-Series, we do have preproduction volumes here, but really, that starts to go into high volume production during the course of 2026."
- Curtis also probed scale-up vs. scale-out shipment timing. Tate stated, "The scale up this year is predominantly preproduction volumes... the volume opportunities of scale-up connectivity for switching is a much bigger dollar opportunity for us as we look forward."
Sentiment Analysis- Analysts maintained a positive to slightly positive tone, focusing on product ramp cadence, customer wins, and the competitive position of new standards. Congratulatory remarks and probing questions about growth outlook and gross margin drivers were frequent.
- Management's tone was confident and constructive in prepared remarks, highlighting strong execution, new partnerships, and strategic roadmap alignment. During Q&A, the tone remained positive, with clear and direct responses. Statements such as "We are excited to be in the middle of it and driving the adoption of open and scalable supply chain in the market" (Gajendra) and "We are able to achieve even lower latencies with some of the products that we have and the other products that we have in development" (Mohan) reflect high confidence.
- Compared to the previous quarter, analyst tone remained positive but more focused on technical differentiation and future product mix. Management's confidence appeared higher, especially regarding the scaling impact of Scorpio and expectations for UALink adoption.
Quarter-over-Quarter Comparison- Q2 revenue grew significantly, with Scorpio P-Series transitioning to volume production, compared to Q1 where it was in preproduction mode. Q2's revenue of $191.9 million and EPS of $0.44 marked substantial sequential and year-over-year growth versus Q1's $159.4 million and $0.33 EPS. Gross margin increased from 74.9% to 76% and operating margin from 33.7% to 39.2%.
- Q3 guidance continues the growth trend, with revenue expected to rise to $203–$210 million, compared to Q2 guidance of $170–$175 million. Product mix is diversifying further, with three product lines each contributing about 10% of sales, and Scorpio X-Series expected to become a major revenue driver in 2026.
- Management's tone shifted from emphasizing execution discipline and conservative outlook in Q1 to a stronger focus on strategic positioning and new market opportunities in Q2. Analyst focus shifted from macroeconomic and supply chain risks in Q1 to product-specific traction and competitive landscape in Q2.
Risks and Concerns- Management noted continued R&D investment as a driver of higher operating expenses. The Q3 non-GAAP tax rate is expected to increase to 20% due to recent tax law changes.
- Hardware module growth, particularly in Taurus, is expected to impact gross margin slightly in Q3. Tate commented, "Taurus as a module, it's hardware. So it carries a little bit lower gross margin than standalone silicon."
- No new material concerns about tariffs, trade, or China exposure were raised in the current quarter compared to Q1.
Final Takeaway
Astera Labs reported robust Q2 results, with record revenue and EPS driven by strong demand across its AI connectivity portfolio. The company is guiding for continued growth in Q3, supported by volume ramps in Scorpio, Aries, and Taurus, and expects further revenue step-ups with the Scorpio X-Series in 2026 and UALink solutions in 2027. Management emphasized Astera's strategic positioning to capitalize on the transformative shift to AI Infrastructure 2.0, building deep ecosystem partnerships and expanding its platform to address a multibillion-dollar market opportunity in rack-scale connectivity.
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